If you’re looking for a new place for your checking and savings accounts, don’t limit your search to banks. You will find that credit unions have more to offer than you think.
Credit unions are not-for-profit organizations that operate on a philosophy of helping people, says Christopher Roe, corporate and legislative affairs officer at CUNA Mutual Group, a provider of insurance, investment and financial technology solutions to credit unions. Unlike banks, which are publicly owned by shareholders, credit unions are co-operatives and owned by members.
“I think a lot of people think that credit unions are smaller because they’re more member-focused, but credit unions can be just as powerful as banks,” said Jay Ferrans, president of JM Financial & Accounting Services in Southfield, Michigan.
It’s a common misconception about credit unions. “(People) don’t see us as a full service,” said Jacqui Kearns, chief brand officer at Affinity Federal Credit Union. However, many credit unions offer the same consumer goods and loans as banks.
- Credit unions are not FDIC insured.
- Most deposits are insured by the NCUA.
- You must be eligible to join a credit union.
- Once a member, always a member.
- Each member has one vote.
- Credit unions can use different terminology.
- You must have a Share account.
- Free ATMs are usually available.
- Credit unions can share branches.
- Not all credit unions offer the same features.
Credit unions are not FDIC insured
The Federal Deposit Insurance Corporation was founded in 1933 in response to a series of bank failures. As an independent federal authority, the FDIC monitors banks for their financial soundness and compliance with consumer protection laws. However, the FDIC does not oversee credit unions.
Credit unions are subject to other government agencies. “We are run by the National Credit Union Association, a federal agency,” said Beth Long, senior vice president of Marketing and Communications for Chartway Federal Credit Union. Nationwide chartered credit unions are subject to the NCUA regulations, while state-recognized institutions are supervised by state supervisory authorities.
Most deposits are insured by the NCUA
From a consumer perspective, the main benefit of the FDIC is its insurance coverage of up to $ 250,000 per depositor. This insurance gives you the certainty that no money will be lost should a bank fail. While credit unions are not covered by the FDIC, their deposits are also insured. All state credit unions and many state-approved credit unions are federally insured through the NCUA. Some government-approved credit unions might instead be backed by private deposit insurance.
You must be eligible to join a credit union
All credit unions have a membership section in their bylaws that defines who can join. “The premise is that the members of the credit union have a common bond,” says Roe.
While membership is limited, joining a credit union is probably easier than you imagine. “In general, you must live, work, worship, or study in an area that is chartered by a credit union,” Long says. Even if you are outside of a credit union’s geographic area, you may still be able to join if you have a family member who is already a member of the institution or if you meet other criteria. For example, the Chartway Federal Credit Union grants membership to anyone who makes a $ 10 donation to the We Promise Foundation.
Once a member, always a member
Once you become a member of a credit union, regardless of what happens to your original qualifications, you can remain a member. “The great thing about it is that you’re a lifelong member,” says Kearns. This means you can keep your credit union even if you move to a new city or change employer.
Credit unions can use different terminology
The terminology of the deposit account at a credit union is a little different from that at a bank. “From a product standpoint, credit unions have stock accounts and stock certificates versus savings accounts and certificates of deposit,” Long explains. Despite the different names, these accounts work similarly.
“The biggest difference in terminology would be members rather than customers,” says Ferrans. Unlike bank customers, members of the credit union own the institution.
Each member has one vote
As the owner of the credit union, the members are entitled to vote whoever sits on the board. “Every member of the credit union gets one vote, regardless of how much they have in their account,” says Roe.
You must have a Share account
All credit unions require you to keep a stock account with a minimum balance, even if you only want a loan. A stock account is the same as a savings account at a bank, but pays dividends instead of interest. It indicates that a person has a stake in the account. Minimum balance required can range from $ 1 to $ 50, with minimums at the lower end being the most common.
Free ATMs are generally available
Many credit unions are part of national ATM networks. This gives you toll-free access to thousands of ATMs across the country. As a result, free ATM access for credit union members can be as widespread as that provided by major banks.
Credit unions can share branches
Even the smallest credit unions can give their members access to multiple branches thanks to the shared branch network, which allows members to conduct many banking transactions in an office of another credit union within the network. This means that credit union members can potentially access thousands of branches across the country.
Not all credit unions offer the same features
Before opening an account with a credit union, check out what products and features they offer. While large federal credit unions like Navy Federal Credit Union and Affinity Federal Credit Union offer services on par with most banks, smaller credit unions might be more limited. For example, some don’t offer mortgages or mobile banking apps. Even larger credit unions can have restrictions on what they can offer business customers. “We can’t loan out that much on the commercial side,” says Kearns.
“Almost all credit unions are small relative to the largest banks,” says Roe. However, this isn’t necessarily a bad thing if you are looking for a financial institution that offers thoughtful service and a personal touch.